S&P upgrades Turkish growth estimates

The ratings agency has upgraded its growth estimations for Turkey due to strong exports

LONDON – The estimate of Turkey’s growth has been upgraded to 2.9 percent for the remainder of the year and to 3 percent for 2015, S&P director Tatiana Lysenko said on Wednesday.

In May, S&P estimated Turkish growth at 2.4 percent for the year and 2.7 percent for 2015.

However, Turkey’s surprising economic performance has prompted international institutes including the World Bank and the Organization for Economic Cooperation and Development, to upgrade their estimates.

Lysenko said: “We expect slower GDP [gross domestic product] growth in Turkey this year and next, averaging 2.9 percent in 2014 and 3 percent in 2015, compared to last year.”

Exports are expected to make a strong contribution to growth in coming months due to “solid” performance and a weaker Turkish lira, Lysenko added. “This should help the economy to rebalance its growth model from credit-driven domestic demand towards more exports,” she explained.

Lysenko praised the recovery of Turkey’s current account deficit, largely attributed to strong export performance, but warned the recovery might not be as strong as it seems. “Part of the improvement comes from the significant reduction in non-monetary gold imports,” she said. “The underlying improvement is therefore less significant than headline numbers would suggest. In our view, Turkey’s large current account deficit remains a source of vulnerability.”

Stressing inflation is currently well above the estimates, Lysenko estimated a year-end inflation of 8.8 percent, above the Central Bank’s 5 percent target.